How to Save for Retirement in Your 50s - SmartAsset

Regardless of when you start, saving for retirement is vital. Although most elderly Americans depend on Social Security to some degree, the average recipient collects only $1,691 per month – not enough money to live comfortably in most places. Your strategy for saving for retirement will depend on where you are in life and how much money you earn. If you’re 50 years old, saving up for retirement will probably require a combination of aggressive budgeting and some lifestyle planning. But it can be done, especially with the help of a financial advisor.

Here’s what to keep in mind as you start saving for retirement at age 50:

Don’t Panic and Don’t Feel Embarrassed

First and foremost, don’t be afraid to ask for help. Almost two-thirds of all Americans feel like their retirement savings are off track. Millions of households don’t have any savings in their 40s and 50s at all, while those that do hold around $61,000 on average.

Maybe you had children or parents to care for. Perhaps you were building your business or paying for a house, or it’s only now that your earnings have given you the kind of flexibility to put extra money aside. No matter the reason for the delay, you can still build a retirement nest egg if you set your mind to it and get serious about saving.

Set Goals

A critical step in any retirement savings plan is to figure out how much you need. That’s true no matter when you get started.

Your retirement goals aren’t necessarily the finish line so much as they help you set minimum targets. It’s always better to exceed these targets, but they let you know what you should prioritize and what you should cut.

The general rule of thumb is to shoot for between eight and 10 times your current annual income in savings. So, for example, if you currently earn $50,000 per year, ideally you want to end up with between $400,000 and $500,000 in savings by the time you retire. Your specific number, however, will depend on your income, your needs and what you can expect to spend in retirement. For example, someone who expects to have their home paid off might need less money than someone who expects to rent indefinitely. Someone who likes to travel will need more money, as will someone who lives in an area with a high cost of living.

This can be a detailed process, but it’s especially important when you start saving later in life. You will probably need to get aggressive about your budgeting, so it’s going to be particularly important to know your monthly targets.

Set An Annual Budget

Once you know how much you need, it’s time to figure a monthly and annual savings budget. No matter what your financial goals are, you’ll need to save aggressively to reach a safe and comfortable retirement savings target. Starting at age 50 means that you have between 15 to 20 years to set aside enough money to live on for several decades. Twenty years is still a long time for an account to compound, and Social Security will help, but your retirement savings will need to be a large part of the monthly budget from now on.

For example, consider someone who earns the 2023 median income of approximately $70,000 per year. Given our rule of thumb, they will want at least $600,000 in savings by the time they retire. If they start saving at 50 and retire at 70, with an annual 10% rate of return, they will need to put around $872 per month, or $10,464 per year, into their retirement account.

You can do this – and need to – but it will mean dedicating a significant chuck of your income to the effort.

Open an Account and Maximize Catch-ups

If you’re just getting started, the first step is to open up retirement accounts.

The key question here will be what kind of accounts to open. Many employers offer access to a retirement plan, like a 401(k). If they offer matching contributions, opening a 401(k) will almost always be the place to start. Beyond that, your main options will be an IRA or a Roth IRA.

In 2023, the IRS allows you to contribute up to $22,500 to a 401(k) and $6,500 to an IRA. Contributing the maximum amount to either account can go a long way in helping you build up your retirement savings over the next 15-plus years.

Then, maximize your catch-up contributions. The IRS allows savers over the age of 50 to invest extra money in tax-advantaged retirement accounts. The details depend on each individual and each account, but as a general rule you can invest an additional $7,500 in a 401(k) and an additional $1,000 in an IRA or Roth IRA each year.

In addition, you can also open up a standard, taxable investment account. If you don’t have access to a 401(k) or similar account, you may need to save more each year than your IRA allows. In that case, put the overage into an investment portfolio in a taxable account.

Take Advantage of Side Work

Here’s the good thing about being 50: You’re good at things. You likely have decades of work experience under your belt, which can translate into gig and freelance work.

Now, a side job may not be what you want at age 50. Whether you’re doing some light consulting, picking up a part-time job or even driving for Lyft or Uber, second-shift work is certainly a better fit for energetic 20-somethings than someone who wants to enjoy the results of their hard work.

But that extra work means extra money, and the good news is that it won’t take that much to make a huge difference in your savings. After all, your living expenses have all been accounted for, so you can dedicate all of your side money to your retirement savings. Consider our monthly savings target of $872 from the example above. Even earning as little as $100 per week from a side job can cover almost half of that investment target on its own.

This won’t necessarily be fun, but it may be the best way to secure a solid retirement without having to cut out life’s little (or big) luxuries.

Delay Retirement If Possible

This is an obvious issue, but it can still make a huge difference.

If you can delay retirement until age 70, you will capture two main advantages. First, it will maximize your Social Security benefits. You receive a 32% increase in your monthly benefits by collecting Social Security at 70 rather than 65, and that alone can make the difference between a comfortable retirement and a stressful one.

Second, this gives your retirement account an additional five years to continue to grow. Critically, remember that the last years of an account’s growth are always the most important. This is when your account may have the most value, so it can potentially accrue the most value from gains.

Consider Moving … Maybe

This is a dicier option. Much of the advice around late-in-life saving involves significant disruptions to your life and lifestyle. This is a double-edged sword, and particularly when it comes to moving.

For many households, the overwhelming majority of their spending goes toward fixed costs like housing and bills. This is an issue overwhelmingly influenced by location, with the costs of housing and related expenses skyrocketing in urban areas. In retirement, however, you don’t need to stay close to a job or office.

Moving somewhere less expensive can be the single most impactful thing you can do to open up your budget and make life far more affordable.

But your quality of life matters and, especially later in life, few things matter more than having access to your friends, family and community. This is an area where the financially sound decision can nevertheless leave you unhappy, cut you off from the people and places that you came to love at an age when traveling is more difficult than ever.

The upshot here is this: moving is a good option to consider. If you are struggling to make the numbers work, cutting your housing costs from $2,400 per month to $800 can possibly solve that problem on its own. Just don’t forget the very real personal costs that come with such a decision. If you can solve your retirement budget with some gig work and tough budgeting, there’s a good chance that you will be happier in the long run.

The Bottom Line

It’s possible to start saving for retirement at age 50 and still reach your savings goals. Doing so takes some careful planning and diligent saving. Just make sure you follow the numbers closely because the longer you wait to save for retirement, the less room for error you have.

Tips for Saving for Retirement

We’ve discussed how to start saving late in life, but achieving your savings goals will require detailed planning. SmartAsset’s retirement calculator can help you estimate approximately how much money you’ll need, as well as how much to save each month to get there.
We honestly can’t overstate the importance of getting expert advice. A financial advisor can be a valuable resource as you save and plan for retirement. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.